Eilermann on selling his way out of the housing downturn

I’m not a good sleeper anyway, so I had a lot of sleepless nights. But it wasn’t focusing on fear, that doesn’t do any good, but just trying to think, ‘Can we do one more thing? Can we find one more creative idea to sell another good month’s worth of houses? What can we do to be one step ahead of the bank?’ In a weird way it was kind of fun. I have a great management team, and we were always trying to figure it out and strategize about where we were going to end up.

You said you had to “sell” your way out of the downturn. How did you do this?

We didn’t cut back on advertising, and that was something where we were smart with our dollars. We really learned we’re not a construction company. We’re a retail organization. That became clearer to me during the downturn. We just had to sell houses. Nothing would work if we didn’t sell houses, so we had to figure out how to keep that brand up — how to advertise, how to market. We invested more in sales training in 2008 than we probably did in the 60 years before that.

We sell a lot of display homes, and a lot of our competitors were closing their display homes a couple days a week. We added two hours a day and opened seven days a week. We invested more in our displays and our sales centers, and that made it easier because a lot of our competitors weren’t even open. So there were a lot of little investments like that that made a big difference.

What did you learn?

The thing I think we all learned is that you have to keep looking ahead. If we knew where this was going to end up, we might not have been able to think all the way through it. You would do something, and you would think, ‘Well, that was tough, but we’re there.’ And then there were four more rounds. You’re having conversations you never thought you’d have, but you couldn’t dwell on the negative.

One of the other things we’ve learned is how to use our capital. We have an advisory board member that used to preach about cycle time and you know, we’d sort of listen, but when you get a Ph.D. in cash flow you really understand cycle time, and every day that we can knock out of a construction schedule is another day of capital that we don’t invest on that house.

How is your company different now?

If we were doing this interview in 2005, I would have told you how our overhead was in great shape and how we were so efficient. But today, everybody wears a lot more hats around here, everybody does a lot more. We had to learn to work a lot smarter, and we had to cut a lot of things that we thought were important out of the business. I think we took every process in the company and made it better. There were no sacred cows, from our IT to the way we delivered our accounting to the way we build houses. We had to analyze everything and made sure we were doing it in the best way possible. And now that we’re here, we’re very efficient, and that’s why we’re very profitable now.

We’re also doing some different product lines that we didn’t do in the past. We’re going higher end. We’re selling million-dollar houses. There is a void in that market right now because it takes a lot of capital to get into that, but the returns are phenomenal.